Northwest Europe delivered LNG price posts record daily gain of 29%

The Northwest Europe delivered LNG price surged 29% Feb. 24, posting it's the biggest one-day increase on a percentage basis since S&P Global Platts launched the assessment in 2010.

The run-up was largely a response to Russia's invasion of Ukraine that could reduce Europe's access to supplies of pipeline gas amid already tight mid-winter inventories.

Platts assessed DES NWE at $36.823/MMBtu Feb. 24, up 29% from Feb. 23, beating the gain on a percentage basis on Dec. 21 when NWE was assessed at a record outright price of $58.638/MMBtu.

"It's certainly driving the offtakers to think of longer term, more stable pricing, and US LNG, because of the stability in the pricing and the destination flexibility," Commonwealth LNG CEO Paul Varello said in an interview Feb. 24.

Varello said he plans to have dinner with a German LNG buyer, who recently expressed interest in volumes from Commonwealth LNG, an 8.4 million mt/year facility that is proposed to be built in Louisiana and start up in 2026.

LNG exporting countries face challenges helping meet US and EU goals of mobilizing meaningful volumes of additional gas supplies to Europe over the near-term, due to global demand, trade-flow fundamentals, commercial contracts, and operational considerations.

Russia's invasion of Ukraine has made mobilizing volumes more challenging.

The overwhelming majority of LNG volumes produced in the US are committed under long-term contracts. The volumes that are available for spot delivery are generally sold to a market that provides the best netback.

"We're not going to be able to help them in any meaningful way, us Americans, in LNG," Varello said. "They're going to have a very difficult time for the balance of this winter."

Freeport LNG CEO Michael Smith said in a separate interview with Platts that ultra-high LNG prices in Europe and Asia have supported renewed talks about new long-term contracts with counterparties that hadn't contacted the Texas liquefaction facility operator in a while.

"I don't want to be the beneficiary of something good for my company that's hurting other people," Smith said. "I think it's a terrible thing that's going on in Ukraine. But with the first wave of US LNG, all the contracts were signed during another terrible event, which was Fukushima."

"The Japanese needed to get capacity and they wanted capacity with no destination restrictions, because they didn't know when the nukes would come back. And, they got it, and it created an industry here in the US," Smith said.

Market participants, meanwhile, were assessing the implication of a huge surge in prices over a short span on fair value cargo bids, offers, and trades in the Atlantic Basin.

Participants were "halting activities trying to understand what will be the next step," an Atlantic-based trader said.

Cargo diversions from Asia to Europe were likely to occur soon, according to a second Atlantic-based trader. "Give it some time and it will happen," the trader said.

The second trader also suggested that the value of US Gulf Coast FOB cargoes could see a premium in the current market environment. "Why wouldn't it?" the trader said.